I'm not a big Alan Greenspan
fan. I think he's one of the biggest political hacks we have in
Washington. --Senate Minority Leader Harry M. Reid (D-Nev.) on
CNN's "Inside Politics," March 2005

Federal Reserve chairman
Alan Greenspan a "political hack"? Political thugis more like it.
Greenspan's policies have robbed retirees, poor people, and working
people--while bestowing riches on the best off in our society.

Let's start with
Greenspan's betrayal of the elderly on Social Security. That's what
got Harry Reid, a former boxer, so angry that he took the gloves off.

In 1983, Greenspan chaired
the commission that convinced Congress to raise the payroll tax that funds
Social Security. He said the tax hike would ensure the Social Security
system's solvency for the baby boomer generation and beyond.

The higher tax fell heavily
on low- and middle-income taxpayers, nearly all of whom pay more in payroll
taxes than income taxes. As promised, the tax hike built up a surplus in the
Social Security trust fund. With the surplus in place, Greenspan turned around
in 2001 and endorsed the Bush administration's tax cuts, whose benefits
went overwhelmingly to the richest 1% of taxpayers, those who make more than
$373,000 a year. Now that those tax cuts have contributed to soaring budget
deficits, Greenspan insists we need to cut Social Security benefits in order to
restore "fiscal discipline." Put simply, Greenspan jacked up taxes on working
people, adding to the budget surplus, and then endorsed squandering that
surplus on giant tax cuts for the top 1%.

It was a masterful
bait-and-switch. As New York Times columnist Paul Krugman points out, if
Greenspan "had tried to sell this package honestly--Let's raise
taxes and cut benefits for working families so we can give big tax cuts to the
rich!'--voters would have been outraged."

Future retirees
weren't the only ones to fall prey to Greenspan's maneuvers --the
poor have taken a drubbing as well. Much of the deficit reduction that
Greenspan urged the Clinton administration to carry out came at the cost of
low-income families. Robert Pollin, co-director of the Political Economy
Research Institute, reports that a majority of the federal budget's swing
from deficits to surpluses during the second half of the 1990s came from
reducing government spending relative to the size of the economy. Relative to
GDP, funding for education was slashed by nearly a quarter, while deep cuts to
food stamps, nutrition, and other supports for poor families carved away
one-sixth of funding for income security programs.

That Greenspan's true
aims were to shrink government and reward the wealthy--and not to enforce
fiscal responsibility--became abundantly clear when George W. Bush took
office. Despite indications in the administration's early days that he
favored "triggers" capping the size of the Bush tax cuts should the budget
surplus disappear, Greenspan never made such triggers a precondition for his
endorsement of Bush's tax giveaways to the rich. Instead, he assured the
Senate in 2001 that "sufficient resources will be available" to undertake both
debt reduction and tax cuts. Given the ballooning federal budget deficit, this
was either a shockingly poor analysis or pure ideological excess.

Today's monstrous
deficits rival those Greenspan insisted must be closed in the early Clinton
years, but Greenspan still favors making Bush's tax cuts
permanent--even in the face of overwhelming evidence that doing so will
force massive cutbacks in social spending and core entitlement programs.
(Making the 2001 and 2003 tax cuts permanent would cost the U.S. government
more than five times the amount that would be necessary to close the projected
shortfall in Social Security over the next 75 years, according to the Center on
Budget and Policy Priorities, a liberal think tank.)

In other words, Greenspan
is the chief enabler of the Republican "starve the beast" strategy for slashing
government spending--first enacting tax cuts and then insisting that
spending cuts (not tax increases) are necessary to restore budget balance.

When Congress asked him
what happened to his concern for fiscal responsibility, Greenspan responded
that he had always favored lower taxes, but that he favored lower spending and
smaller government as well. And the strategy, at least the government slashing
part, is working. In 2004, federal government revenues relative to the size of
the economy reached their lowest level since the 1950s.

For all these reasons, the
liberal commentator Jonathan Chait has offered up a modification of Reid's
insult, calling Greenspan "a Fiscal Policy Hack." His careful choice of words
underlines Greenspan's failures in the sphere of fiscal policy, or
government spending and taxes. "For the last four years," Chait points out,
"Alan Greenspan has cast himself as a champion of fiscal responsibility while
lending crucial support to policies that undermine it." Chait insists
nonetheless that "Greenspan's views on monetary policy--specifically,
his setting of interest rates--"ought to count for a lot." Sadly, this
common liberal position turns a blind eye to the role Greenspan's monetary
policy plays in perpetuating the searing inequality of today's economy.
Greenspan makes monetary policy on behalf those who hold financial assets, not
job seekers or workers. And Greenspan's insistence that inflation must be
kept low to protect the value of stocks and bonds even if it means keeping a
cap on employment growth might count for a lot in the minds of some--but it
shouldn't.

Think back to the second
half of the 1990s boom. Early on, Greenspan warned that an "irrational
exuberance" was igniting a dangerous stock market bubble. In a 1996 Federal
Reserve Board meeting, he acknowledged that raising the margin requirement
would "get rid of the bubble." The margin requirement is the percent of the
purchase price of financial investments, like stocks and bonds, that the buyer
must pay for in cash rather than credit. (Since 1974, investors have been
required to pay for at least 50% of their stock purchases with cash.) The Fed
chair could have raised margins on borrowing to purchase stocks then, cooling
off the stock market without sacrificing the whole economy. But, unwilling to
confront the monied classes, or uninterested in doing so, Greenspan instead
endorsed a huge capital gains tax cut in 1997 that only inflated the bubble
more.

Then, in late 1999 and
early 2000, with the bubble apparent to everyone, he slammed on the economic
brakes, repeatedly hiking interest rates and helping to bring on an economic
slowdown just as working people were beginning to see some healthy gains in
their paychecks. The recession and the job-barren economic recovery that
followed have wiped out much of those gains. Last year, workers' real
wages, their purchasing power, actually declined for the first time in 14
years. And today, even Wall Street Journal reporter David Wessel warns
that "the risk to workers now is that the Federal Reserve, anxious about
indications that inflation is returning, [once again] will raise interest rates
to slow the economy before the labor market gets strong enough to push wages
up."

Outing Greenspan's
political thuggery is the first step in the battle for a Federal Reserve Board
that serves all of us, not just the rich. No longer the man behind the curtain
glorified in Forbes magazine billboards, or the Maestro, as
establishment journalist Bob Woodward dubbed him, Greenspan might finally be
seen for what he is: public enemy number one when it comes to building a more
just economy. And once they're accurately translated, "Greenspan-speak,"
the Fed chair's notoriously obscure mutterings that tighten the screws of
class privilege at every turn, will no longer pass for a truthful and
disinterested take on the state of the U.S. economy.

John Miller is a
professor of economics at Wheaton College and a member of the Dollars &
Sense collective.